The Reflection of the Contractual Relationships between Shareholders and Managers in the Financial Statements: some Romanian Features

Author:Dan Florentin BĂDESCU, Ph.D. Student

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Keywords:agency theory, self-interest, share-based payment, postmodernism

Abstract:
This article evaluates the trends and development of agency theory in Romania. The studied objective is how to minimize the self-intersted behaviour that arise in most employee/contractual relationships when shareholders (principals) hire top managers (agents) to perform some services and then delegate decision-making authority under conditions of incomplete and asymmetric information.\r\nThe author studies these aspects and the way which are represented in the Romanian financial statements. A proper applying of the agency theory concept in order to reduce these conflicts reveals that the executive compensation must be tied to performance, but some monitoring costs are also undertaken. Share-based payment awards (such as share options and stock options) are a key issue for both executives and shareholders, being part of the remuneration of the employees for their services accordingly IFRS 2. \r\nLooking for the corelations between managerial incomes depending on performance indicators in the financial statements, the author finds that there is a lack of transparency, and the managing remunerations accordingly share-based payment awards are still avoided. A critical theory and postmodernist approach is recommended for treating these aspects, especially reducing described conflicts.\r\n

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